DENVER—A price jump for natural gas could be in store for the U.S. as soon as this winter, according to predictions made by some analysts.

“We’re really bullish for natural gas in 2017. We’re expecting a significant price signal—a big jump up in gas prices—starting as soon as winter shows up, probably in December of this year,” said Bernadette Johnson, managing partner at Ponderosa Advisors LLC, a Denver-based energy advisory firm.

“Part of the reason that we are so bullish for natural gas prices next year is because we’re bearish for oil prices. We don’t think that oil prices will bump much above an average of $52 per barrel [bbl] next year,” Johnson said during a webinar the firm recently hosted at its offices.

Lower oil prices mean less drilling for crude, which translates to lower volumes of associated natural gas production. Indeed, the fall in crude prices during the past two years has already substantially impacted associated gas production.

According to Ponderosa’s analysis, each $10/bbl price change in crude impacts some 3 billion cubic feet per day (Bcf/d) of associated gas production by 2020.

Johnson’s bearish oil price forecast rests on the fundamentals of the market in the first half of 2016 experiencing a drop in supplies rather than growth in demand.

“The bad news is that the big supply drops we saw were temporary—from terrorist attacks on infrastructure in Nigeria and wildfires in Canada,” she said. “Most of those [second-quarter] drops are already back, and today the market is already 1 million barrels per day long again. We haven’t fundamentally fixed anything yet.”

Additionally, U.S. commercial crude oil stocks are at record levels, and are projected to remain at near-record levels for the rest of 2016. Similarly, U.S. petroleum product stocks are also significantly higher than normal.

“We’re not going to see a recovered crude market and a sustained higher price above $50 per barrel until we bring the supply/demand lines back together and work off stocks,” Johnson said. “It is going to take a while to work off the overhang.”

Drilling Directed Toward Oil

Since the rig count hit its trough this past May, operators have been putting rigs back to work. More than half of the reactivated rigs have been added in the Permian Basin, and a notable number have gone back to work in the Scoop/Stack play in the Midcontinent.

The increased rigs are primarily targeting oil plays, so the new crude supplies that show up some four to six months from now will not impact natural gas supply to any degree.

While an unconstrained northeast Pennsylvania area could deliver astonishing volumes of gas, Ponderosa is holding production from that play flat in its forecasts.

“We’re saying it can’t ramp up to previous drilling levels because the pipelines are not there to move it out,” Johnson said.

Price Response Expected

The upshot? This winter could see a perfect storm for gas prices: the industry is steadily working through its inventory of drilled but uncompleted wells and new wells are not being drilled.

Additionally, Ponderosa thinks most of the gas production that was voluntarily shut in last year is already back onstream. “We’re currently modeling about 1 Bcf per day in production growth in December over November levels,” Johnson said. “That’s lower than the normal rise we see in the winter.”

And it will not be enough to satisfy demand. Ponderosa sees about 12 Bcf/d of additional demand coming on between now and 2020 from a combination of LNG exports, Mexican exports, industrial demand growth and power burn growth.

“If this demand happens, what natural gas price do we have to have to bring enough gas into the market? We think we will likely see a price spike starting in December, when the market is going to figure out that we need more gas,” Johnson said. “The natural gas market will be short and prices will have to recover.”

Interestingly, as prices for crude gradually recover during the coming years, more associated natural gas production will likely work to moderate the natural gas price.

Ponderosa projects prices of $4.50/Mcf for gas in 2017, declining to $4.15 in 2018, $4 in 2019 and then to $3.75 in 2020.